Determinants of Total Factor Productivity Growth in India ()
ABSTRACT
Purpose: The paper identifies the structural determinants of total
factor productivity (TFP) growth in India between 1990 to 2019. Design/Methodology/ Approach: To examine the drivers of
TFP growth at the aggregate
level, ARDL models are used, whereas for identifying the sectoral level determinants,
panel pooled group mean estimation methods suggested by Peseran et al. (1999) and
2SLS-IV approaches are used. Findings: The
empirical analysis suggests at the economic level, a significant portion of the variation of aggregate TFP growth is
explained by idiosyncratic shocks like deviations in rainfall, and exogenous global factors like global GDP growth rates. Public investment in
infrastructure, an increase
in the share of ICT capital in aggregate fixed capital, and improved global exposure through higher exports and
inflows of foreign direct investment (FDI)
are also associated with increased TFP growth. At the sectoral level, we find
that productivity growth in the input-producing
sectors and improvements in labour qualities are associated with higher TFP growth
in all the sectors in India. Capital deepening
is associated with improved TFP
growth in manufacturing and market services. Originality/Value: To the best of our knowledge, this is the first attempt to empirically estimate
structural determinants of TFP growth in
India using India KLEMS and other nationally representative official
data sources.
Share and Cite:
Goldar, B. , Chattopadhyay, S. , Nath, S. , Sengupta, S. and Das, P. (2023) Determinants of Total Factor Productivity Growth in India.
Theoretical Economics Letters,
13, 683-718. doi:
10.4236/tel.2023.133041.
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